Wall Street Vampires

Rachel Lewis, Citizen Vox | Op-Ed

Vampires. Thieves of the night. As sunlight is said to be deadly to them, these mythical creatures venture out to drain the blood from their innocent victims only when it is dark outside. Judging by the reactions of Wall Street to Public Citizen’s attempt to shine a light on their industry, it seems sunlight kills more than vampires though. Lady Liberty can’t help but wonder if the Goldman Sachs, J.P. Morgan et al crew are trying to audition for the next season of True Blood . . . or, more likely, they have something to hide.

Remember that big gas price spike back in 2008? Well, Tyson Slocum, director of Public Citizen’s Energy Program, didn’t buy the reasons offered for it then, and he didn’t buy it this spring either when he spoke with then-MSNBC’s Cenk Uygur for a segment properly entitled, “Rigged Game.” Uygur’s first question, ”Is it possible that speculators are driving up the gas prices?” Slocum’s reply–”Absolutely.” At the time President Barack Obama, responding to the media frenzy over gas prices, announced the formation of a task force to look into what was driving the increase. Slocum explained to me that this was many months ago and so far, “not a peep” has been heard from this investigative team.

Fast-forward a few months. Sen. Bernie Sanders (I-Vt.) managed to use his congressional powers to get a hold of a set of three-year old trading documents from one of the days leading up to the 2008 $144-per-barrel oil spike, which coincided with the exorbitant gas prices we all remember seeing at the pump then. Sanders, aware of Slocum’s expertise, forwarded these documents to Slocum and to theWall Street Journal, which reveled at what it considered a ”rare glimpse of the secretive world of oil trading, where buying and selling often takes place away from public markets.” Soon thereafter, all hell brook loose . . .

. . . and guys the likes John Damgard, lead lobbyist for futures traders, were quickly attending to PR scoffing and pulling out their best weapons. [Enter Fred Hatfield], former commissioner of the U.S. Commodity Futures Trading Commission (CFTC), a gentlemen with a charmingly irreproachable demure and unfortunate view of the facts. Soon Bloomberg TV had paired Hatfield and Slocum to debate.

In an op-ed for The Washington Post titled, “What Wall Street doesn’t want us to know about oil prices,” Sen. Sanders fought back against criticisms from Hatfield and another former CFTC member James E. Newsome, the two of whom the Washington Post initially failed to cite as a director of energy commodity behemouth Intercontinental Exchange and a registered lobbyist for multiple energy and energy commodity trading companies, respectively. Sanders cited numerous reasons why Public . . .

. . . Citizen is in the right for calling for disclosure including a June 2 article in the Wall Street Journalarticle that touted the benefits Wall Street reaps from higher oil prices and testimony given before a Senate panel by ExxonMobil Chairman Rex Tillerson, who confessed that the price of oil may have increased by as much as 40 percent thanks to speculation.

So what is speculation? In short– it’s betting on the future. It’s a way of manipulating markets for the sake of greed by trading in such a way as to artificially inflate price. Remember the slicing and dicing that was to blame for the subprime mortgage scandal that led to the current global economic crisis we are in? Well, a similarly confusing tactic of rapid sells and buybacks occurs when speculators use a sneaky combination of short and long trade purchases in the energy commodities market.

Ianthe Jeanne Dugan of The Wall Street Journal writes, “Commodities traders, unlike big buyers and sellers of stocks, have never had to disclose their holdings publicly.” This is precisely why the leak of a single days worth of three-year old trading docs has caused such a controversy. While the trading docs show only a snapshot, in a blog post published last week, Think Progress’ Lee Fang quotes Public Citizen’s Slocum as saying of the data:

What this [the leaked trading data] tells us is who the big players are, because volume equates market share in a way, if you are driving volume, and if your volume is at a significant enough amount you become a price setter or at least a price trender where you’re going to have the effect of unilaterally influencing prices and that’s very significant. And you’ve got sort of a cascading effect, and the smaller traders are going to follow Goldman Sach and others will chase the leader, which is why Dodd-Frank said Congress shall set position limits in these markets. Position limits would limit the market share, limit the positions banks could take. Dodd-Frank recognizes the danger that one or two traders can have when they dominate the positions in a given market.

So, who are the speculators? Well, in addition to Goldman Sachs and J.P. Morgan, there are the usual suspects (Big Oil incs) but, as it turns out– there are also hedge fund investors. Fang points out top among these investors is ” . . . Paul Singer, a billionaire investor and a major donor to Karl Rove’s network of attack groups and to Republicans on the Financial Services Committee.” But wait, what terrible blood slurping cocktail party could be complete without the Koch Brothers! Fang concludes, “The Dodd-Frank law passed last year contains a mandate that the CFTC crack down on rampant oil speculation by imposing position limits to curb the number of contracts held by participants in this market. As lobbying firms have spent months fighting these new rules, it is instructive to note that the biggest players 2008 oil price spike have also flooded campaign coffers of DC politicians, potentially hoping for influence in shaping these rules or weakening the CFTC’s hand (through budget cuts and other limitations).”

Today, Sen. Bill Nelson (D-Fl.) introduced the the Anti-Excessive Speculation Act of 2011, which Public Citizen is thrilled to support because Sen. Sanders was right when he wrote, “The American people have a right to know how much excessive speculation has driven up oil prices and which Wall Street firms are doing it.” It’s dark enough outside as it is. The economy is weak, most wallets are thin. What Sanders released was just one days worth of trading data, and it’s three years old at that but– like a single ray of sunlight– it’s already enough to make the vampires scream. Time to summon the sun. They may have fangs but we have the numbers. Anyone else ready to take on the Vampires of Wall Street?

Trader Tells BBC That Goldman Sachs Rules The World and the Stock Market is "Toast"

If your instinct tells you the world financial system is screwed but you don't know why, let trader Allesio Rastani explain. Maybe the only stock market dude ever to be honest outside of his crony circle, Rastani appeared on the BBC this morning to discuss why hedge funds and other smart/big money firms "don't care" about the Eurozone and are moving away from the market. "Most traders don't really care that much how they're going to fix the economy," he said. "Our job is to make money from it... I have a confession. I go to bed every night and dream of another recession." Thank you, Rastani, for your candid statements. But there is more! "The governments don't rule the world. Goldman Sachs rules the world." He's kind of like a rogue hero, even though his field is little gross. But then again, he tells us all how to save ourselves. Watch the whole awesome, shocking interview, via ZeroHedge:

The Morning Call’s Amazon Sweatshop Probe

It was just last month that foreign students working at Hershey’s for the summer went on strike over poor labor conditions.

Now, a huge investigation in the Allentown Morning Call shows Amazon treating its local warehouse workers like dirt—and endangering their health.

Spencer Soper’s terrific piece of reporting goes around the company, which wouldn’t respond to his interview requests, and uses interviews with twenty workers as well as open records requests to show how the company ran a modern-day sweatshop. Literally.

Workers say Amazon refused to open loading bay doors to circulate air because they feared theft, and it drove its largely temp workforce with ever-increasing, and impossible-to-meet, productivity demands. And so you get scenes like this:

During summer heat waves, Amazon arranged to have paramedics parked in ambulances outside, ready to treat any workers who dehydrated or suffered other forms of heat stress. Those who couldn’t quickly cool off and return to work were sent home or taken out in stretchers and wheelchairs and transported to area hospitals. And new applicants were ready to begin work at any time.
That last sentence shows The Morning Call pushing the story beyond a simple one about ill-treated workers into a broader piece that shows readers the labor and power dynamics involved. Along those lines, this paragraph is terrific:

The supply of temporary workers keeps Amazon’s warehouse fully staffed without the expense of a permanent workforce that expects raises and good benefits. Using temporary employees in general also helps reduce the prospect that employees will organize a union that pushes for better treatment because the employees are in constant flux, labor experts say. And Amazon limits its liability for workers’ compensation and unemployment insurance because most of the workers don’t work for Amazon, they work for the temp agency.

The reporting we get on work environment itself is also great. On the ambulances, this quote from a former employee sums it up pretty well:

“I’ve never worked for an employer that had paramedics waiting outside for people to drop because of the extreme heat.”

This would have been a very good story even if The Morning Call had stuck with its twenty workers as sources. But its Freedom of Information Act request for OSHA records takes it up a notch.

On June 2, a warehouse employee contacted OSHA to report the heat index hit 102 degrees in the warehouse and 15 workers collapsed. The employee also complained that workers who had to go home due to heat symptoms received disciplinary points…

On June 10, an OSHA worker heard the following message on the agency’s complaint hotline from an emergency room doctor at Lehigh Valley Hospital-Cedar Crest: “I’d like to report an unsafe environment with a[n] Amazon facility in Fogelsville … Several patients have come in the last couple days with heat-related injuries.”

The OSHA FOIA is particularly important because the paper finds an Amazon safety manager telling OSHA that it “typically” extends breaks when the heat index hits a certain level, and The Morning Call’s sources say that wasn’t true. It also reports that Amazon would give overheated workers demerits from going home. Particularly for the temp employees, that could mean the difference between having a job and not having a job. While the company changed its policies to let people go home after OSHA started sniffing around, but some things didn’t change:

On July 25, a security guard at the Amazon warehouse called OSHA and said the temperature exceeded 110 degrees. The guard reported seeing two pregnant women taken to nurses and that Amazon would not open garage doors to help air circulation.“They do have ice pops going around and water everywhere,” the guard reported to OSHA.

And is this even legal?

Sharon Faust said she took a temporary job with ISS, hoping it would lead to a permanent position with Amazon.

Then in June, the 57-year-old Breinigsville resident was diagnosed with breast cancer. She notified ISS that she needed surgery. They told her she would need a note from her doctor saying when she could return.

Faust had surgery July 20 and reported to the Amazon warehouse with a doctor’s note saying she could return to work Aug. 17. When she arrived to deliver the note within a week of her surgery, she found out the doctor’s note wasn’t necessary.

“They said my assignment with them is terminated. I was just flabbergasted,” Faust said. “I devoted nearly a year of my life trying to get a job and that whole time was a waste. They kept me on and kept me on until I handed in that medical paper, and they said, ‘See ya.’ “

That was after the company started getting visits from OSHA.

The Morning Call also notes the relationship between a temp company called Integrity Staffing Solutions and Amazon. ISS does a lot of work for Amazon but doesn’t show up much in previous press clippings in Factiva:

A poster after this article starts off by saying, "what's next, aroma therapy?

That's the libertarian/conservative response to something like this - you're lucky to have a job. Stop whining you ungrateful bastard. You don't deserve nothin' but a chance to bust your ass. Don't like it - quit!!!!

Yeah, there are good corporations that wouldn't do this. But we have to know that this stuff happens to truly know what some are capable of. Profit (and frequently greed) is a huge motivator. And that is the only reason for being in business, isn't it?

There are no excuses left. Either you join the revolt taking place on Wall Street and in the financial districts of other cities across the country or you stand on the wrong side of history. Either you obstruct, in the only form left to us, which is civil disobedience, the plundering by the criminal class on Wall Street and accelerated destruction of the ecosystem that sustains the human species, or become the passive enabler of a monstrous evil. Either you taste, feel and smell the intoxication of freedom and revolt or sink into the miasma of despair and apathy. Either you are a rebel or a slave.

To be declared innocent in a country where the rule of law means nothing, where we have undergone a corporate coup, where the poor and working men and women are reduced to joblessness and hunger, where war, financial speculation and internal surveillance are the only real business of the state, where even habeas corpus no longer exists, where you, as a citizen, are nothing more than a commodity to corporate systems of power, one to be used and discarded, is to be complicit in this radical evil. To stand on the sidelines and say “I am innocent” is to bear the mark of Cain; it is to do nothing to reach out and help the weak, the oppressed and the suffering, to save the planet.

To be innocent in times like these is to be a criminal. Ask Tim DeChristopher.

Choose. But choose fast. The state and corporate forces are determined to crush this. They are not going to wait for you. They are terrified this will spread. They have their long phalanxes of police on motorcycles, their rows of white paddy wagons, their foot soldiers hunting for you on the streets with pepper spray and orange plastic nets. They have their metal barricades set up on every single street leading into the New York financial district, where the mandarins in Brooks Brothers suits use your money, money they stole from you, to gamble and speculate and gorge themselves while one in four children outside those barricades depend on food stamps to eat. Speculation in the 17th century was a crime. Speculators were hanged. Today they run the state and the financial markets. They disseminate the lies that pollute our airwaves. They know, even better than you, how pervasive the corruption and theft have become, how gamed the system is against you, how corporations have cemented into place a thin oligarchic class and an obsequious cadre of politicians, judges and journalists who live in their little gated Versailles while 6 million Americans are thrown out of their homes, a number soon to rise to 10 million, where a million people a year go bankrupt because they cannot pay their medical bills and 45,000 die from lack of proper care, where real joblessness is spiraling to over 20 percent, where the citizens, including students, spend lives toiling in debt peonage, working dead-end jobs, when they have jobs, a world devoid of hope, a world of masters and serfs.

The only word these corporations know is more. They are disemboweling every last social service program funded by the taxpayers, from education to Social Security, because they want that money themselves. Let the sick die. Let the poor go hungry. Let families be tossed in the street. Let the unemployed rot. Let children in the inner city or rural wastelands learn nothing and live in misery and fear. Let the students finish school with no jobs and no prospects of jobs. Let the prison system, the largest in the industrial world, expand to swallow up all potential dissenters. Let torture continue. Let teachers, police, firefighters, postal employees and social workers join the ranks of the unemployed. Let the roads, bridges, dams, levees, power grids, rail lines, subways, bus services, schools and libraries crumble or close. Let the rising temperatures of the planet, the freak weather patterns, the hurricanes, the droughts, the flooding, the tornadoes, the melting polar ice caps, the poisoned water systems, the polluted air increase until the species dies.

Who the hell cares? If the stocks of ExxonMobil or the coal industry or Goldman Sachs are high, life is good. Profit. Profit. Profit. That is what they chant behind those metal barricades. They have their fangs deep into your necks. If you do not shake them off very, very soon they will kill you. And they will kill the ecosystem, dooming your children and your children’s children. They are too stupid and too blind to see that they will perish with the rest of us. So either you rise up and supplant them, either you dismantle the corporate state, for a world of sanity, a world where we no longer kneel before the absurd idea that the demands of financial markets should govern human behavior, or we are frog-marched toward self-annihilation.

Those on the streets around Wall Street are the physical embodiment of hope. They know that hope has a cost, that it is not easy or comfortable, that it requires self-sacrifice and discomfort and finally faith. They sleep on concrete every night. Their clothes are soiled. They have eaten more bagels and peanut butter than they ever thought possible. They have tasted fear, been beaten, gone to jail, been blinded by pepper spray, cried, hugged each other, laughed, sung, talked too long in general assemblies, seen their chants drift upward to the office towers above them, wondered if it is worth it, if anyone cares, if they will win. But as long as they remain steadfast they point the way out of the corporate labyrinth. This is what it means to be alive.

Empathy and True Stories from the 99 Percent

The media has spent a lot of time asking about the specific grievances of the protesters in the "Occupy" movement. Rather than ask people camped out at one of the protests, they need look no further than at the heart-wrenching reminders of what life is really like in the United States at We Are the 99 Percent. The site is filled with photos of real Americans and their brief stories. Stories like this:

My name is Allison, I’m a 13 year old 8th grader. I only get a few hours of sleep at night, but I don’t tell my parents because they don’t need to know that I need sleeping pills. I’ve been showing symptoms of Schizophrenia but we can’t afford for me to go see a doctor about it. My parents get really scared when they have to pay the morage because it really cuts down on our money. I’ve stopped eating alot so there’s more food for everyone else.

My parents don’t know that I know we’re the 99%.

And this:

Today my sociology professor asked a class of 35-40 hard-working students at a respected, if public, university how many of us expected to get a job after graduation… No one raised their hand. Then she asked how many of us had over $10,000 in student loans… Almost every hand in the classroom, including mine, shot up.

WE ARE THE 99%.

And this:

As a single mom, I put myself through college and grad school so I would have resources for my old age, and so I could help my kids get established in life. I had a good job, then a chronic illness gradually dismantled my life. I lost my job, most of my savings, and ended up living with friends and family for years because I could not take care of myself. I got lucky: I found a dr who could help me get some of my function back, worked part-time for a while, and I used the rest of my savings to buy a small house of my own. But it was too late: the “recession” kept me from resurrecting my career— I was competing with too many other people who did not have my gap in employment. My resources are gone, I can’t sell my house in this market so I can share housing with a friend. I live month to month on SS and a small pension, and can’t afford dental care or eyeglasses. I worry about my children, now grown, who are all struggling in one way or another, living also month to month, and my grandchildren, who may not have much of a future.

WE ARE THE THE 99%.

There are now over 60 pages worth of these stories, each with photos of the real people who have submitted them, and many more coming each day.

Reading them is a constant reminder of how perilous is the line between good fortune and the threat of homelessness. I personally am one of the very lucky ones. At 30 years old, I make a modest five-figure income (well below what is necessary to live simply for a family of four in my area.) I run a small business which has managed to remain moderately successful for over six years even as many of my friends and acquaintances in my profession have abandoned the field. I have some decent savings and no debt. I went to a good university on full-ride academic scholarship and thus had no need to take on student loans. I was lucky enough to realize that the housing market was wildly overinflated, and chose not to purchase property even though my parents and many of my friends did; I have a month-to-month lease on a nice apartment. I have decent health insurance through the individual market, and have only had a six-month gap in my life without health insurance.

Yes, I have worked hard, and yes, I have been frugal and had good predictive judgment. In theory, I could easily say that I earned my good fortune and tell these people to pull themselves up by their bootstraps and take their hands off my tax dollars. In theory.

But doing that would make me a delusional, self-absorbed narcissistic asshole. Because the reality is that as hard as I've worked, I've also been incredibly lucky. Lucky enough to have had educated parents who helped tutor me at home. Lucky enough to have been brought up in a middle-class lifestyle where education was valued. Lucky enough to have had parents who owned a small business themselves, where I worked for essentially room and board throughout college while learning the ropes of an industry and the basics of running a business before starting out on my own. Lucky enough to go to a good college where I met my amazing current fiancee. Yes, I've worked hard all my life. For two years I took a 45-minute bus ride to college in the morning in business clothes, and rode it back right after class to work late into the night, then stayed up until 2am to do homework. I didn't have much of a social life, and I didn't take a year trekking through Europe.

But I've also been blessed with remarkable good fortune--fortune that I understand could run out at any time.

No, I'm not in the top 1% of incomes. I'm not even in the top 10%. But I'm incredibly fortunate nonetheless. I realize that, and I intend to do my damnedest to help those who have been less fortunate than I.

I can't even imagine what it must be like to live in the moral vacuum inhabited by people like this:

Student loans started out as a good idea. The GI Bill got the whole thing started, by having the government create a program that provided higher education for those who would otherwise be unable to afford it. The end result was a dynamic, educated group of former military people (trained, disciplined, seasoned and responsible) who helped sweep the country to great prosperity during the 1950s and early 1960s.

What most people forget now is that the GI Bill was payment for services rendered. In that way, it differed dramatically from student loans, which are payments for . . . what? It’s questionable whether those students currently getting “educated” at America’s top propaganda institutions . . . er, colleges and universities, will contribute anything to the economy — and we know that render any services to the American people, in the cause of American freedom, in exchange for those cash handouts...

[T]he loans have created a self-entitled group of people who, rather than pay off their debt, feel that it’s totally appropriate for them to attack others’ financial livelihood, as they’re doing now when they try to interfere with our nation’s economic core.

Just as the Vietnam war protests had nothing to do with actual principles, and everything to do with a spoiled generation’s fear of the draft; so too do today’s protests in America’s financial centers have nothing to do with concerns about America’s economy, and everything to do with deadbeat kids who willingly took on an unreasonable amount of debt, and are now facing the financial consequences for their cupidity and stupidity.

There are few things more morally repulsive than people who started on third base, enjoyed the benefits that government and society provided them, and then think they hit a triple while declaring that human rights such as healthcare and education should only be available to those who can directly afford to pay for them.

Few things are more disgusting and shameful than those who have experienced good fortune themselves, and feel nothing for the people whose stories, like those at We are the 99 Percent, are all around them as reminders of what their lives could be like if just one or two breaks had gone differently.

Pearl clutchers and "bipartisan" hand wringers insist that the left and right in this country must come to some meeting of the minds. An agreement on rational, sensible policy on which we can all come to consensus.

But the truth is that there is no coming to terms with those who live in an ideological bubble that prevents from feeling basic empathy or shame. There is a real battle of ideas being waged in this country, and only one side is going to come out victorious.

It will either be those who understand what it's like to be part of the 99 percent and realize that the system is broken. Or it will be those who believe that all of these people deserve to suffer in squalor. There can and will be no middle ground.

"But the truth is that there is no coming to terms with those who live in an ideological bubble that prevents from feeling basic empathy or shame. There is a real battle of ideas being waged in this country, and only one side is going to come out victorious"

I'm glad you finally agree, but the battle is not about feeling basic empathy or shame as suggested. It is about "big government" vs free enterprise as Brooks suggests. It is about liberal vs. conservative. It is about statism vs. classical liberalism.

Earned success is what makes people happy and free enterprise provides a good vehicle.

I'd like you to read Brooks' book. Would you like me to buy a copy and send it to you? I can send it to a mail drop box for you. I would be interested in your thoughts.

Union Bank Email Show Overdraft's Seedy Underbelly

From American Banker

Banks have long argued that processing debit card transactions by starting with the largest dollar balances and working their way to the smallest benefited customers. Here's an alternate explanation of what might have motivated them: "Multiple Millions $$$$$$$$$$$$$$$$$$$$."

That was the pitch a popular vendor of "high-to-low" debit transaction processing software delivered to Union Bank of California, a unit of Mitsubishi UFJ Financial Group, according to documents recently unsealed in a consolidated federal class action.

CAST Management Consultants promised that by processing customers' daily checking and debit transactions based on the highest to the lowest dollar values, instead of in chronological order, Union Bank could drastically increase how many "insufficient funds" fees clients paid. Union Bank signed up, according to an amended class action complaint pending in U.S. District Court for the Southern District of Florida.

The Union Bank case is one of more than 30 related suits pending before U.S. District Judge Lawrence King and the first in which previously confidential documents have been unsealed. Consolidated by the court in 2009, the now unified multidistrict class action alleges that large banks manipulated the order in which they processed debit card transactions to checking accounts to stick customers with higher overdraft fees. Specifically, it alleges that banks shifted to high-to-low processing to maximize the number of overdraft fees charged after customers' checking account balances dipped below zero. Such practices were often hidden from bank customers even as they were used to extract illegal fees, the class action alleges.

The industry has contended that high-to-low processing was legitimate and in fact in demand among customers who wanted their largest bills to be paid first.

The difference of views has led to numerous cases charging leading banks with wrongful behavior. Among them: Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc. and Fifth Third Bank. Some of the suits have been settled out-of-court. In other cases banks appear to have a solid shot at getting claims transferred to industry arbitration panels, where they are likely to result in a more favorable outcome for defendants, as previously reported in American Banker.

In Hassler v. Sovereign Bank, a judge in the U.S. District Court of New Jersey dismissed a high-to-low case because the judge found that the bank's processing method had been adequately disclosed.

Whatever the final outcome of the Union Bank case, it could prove highly embarrassing to the commercial banks by showing how they aggressively adopted recommendations of lavishly paid consultants, even as they downplayed the ethical, legal and reputational risks.

"They're all similar," says Aaron Podhurst, an attorney on the plaintiffs' executive committee in the consolidated Florida class action, of the lawsuits. Banks "were warned in-house that this is dangerous, get rid of this, not a good idea. And they didn't heed that."

Documents filed in the Union Bank case appear to paint a picture of an institution focused on maximizing fee revenue by using CAST's technology while dismissing employee concerns that resequencing payments was unfair and possibly illegal. One bank employee argued high-to-low processing was harmful to "Poor but Honest" customers, according to an email sent from a colleague and cited in the amended complaint.

Bank documents turned over to plaintiff attorneys during discovery indicate Union Bank agreed that CAST would receive 20% of any extra overdraft charges generated under its high-to-low system. Union Bank employees also discussed how to hide the bank's policy from customers, even as it was costing them tens of millions of dollars, internal emails show.

"By design, the details of what happens inside the bank when an overdraft occurs were never intended to be communicated to the public," a Union Bank employee wrote to a colleague in an email cited in the suit.

Union Bank said its overdraft policies were in line with those of its peers in a written statement to American Banker. Those policies "reflect our customers' preferences, and are lawful," a bank spokeswoman wrote. CAST, which is based in Los Angeles, did not respond to repeated requests for comment.

There is a strong case to be made for processing checks — as opposed to debit card transactions — in descending order from those with the largest to the smallest balances, says industry researcher Mike Moebs. Large payments tend to be the most important to customers, and beginning with them makes it more likely that they will be paid in the event that a customer does not have enough money to immediately cover all charges.

In contrast to check processing, however, debit card charges are what are called "must pay" transactions, meaning the bank is committed to covering all bills in the system. Under these terms, there is no benefit to customers in having their largest transactions processed first.

Union Bank reversed its high-to-low overdraft policy last year. It now posts transactions from the lowest-to-highest values.

Some Union Bank records do show employees arguing that high-to-low processing would meet an unspecified "customer demand." However, executives raised objections on fairness grounds, while the employees implementing the system appear to have feared an adverse customer reaction.

"Posting large items first has been done before and is very painful to customers," wrote Charlie Pedersen, who oversaw the bank's processing operations, shortly after the high-to-low processing policy was proposed. "So go forward into the night, but keep the headlights on."

Pedersen, who has since retired, did not return a call from American Banker.

"We should … burn all our documentation that [says the only purpose of reordering payment] posting sequence = more fees," an employee wrote in an exchange cited by class action attorneys.

Union Bank's venture into high-to-low processing began in 2002, when it retained CAST, a consulting firm headed by Steve McCollum, a former Citigroup banker. CAST promotes itself on its website as an expert in "revenue optimization" based on a "database of proven revenue enhancement practices." Its clients include Citibank, Wells Fargo, U.S. Bank and more than a dozen large regional banks.

Union Bank brought in CAST with a mandate to leave "no stone unturned, particularly in the fee-income area," according to a document cited in an amended complaint but not yet available through Federal court records.

CAST turned to overdraft processing. The tweak required is conceptually simple: By deducting a customer's largest payments first, the bank increases the likelihood that his or her account will incur multiple overdrafts.

The order in which the transactions are processed can have a big influence on fees charged. Assume, for example, that a customer has $100 in his checking account and engages in four debit card transactions over the course of a day — three for $10 and a final one for $110. Processing the small transactions first will result in a single overdraft charge, while putting through the large transaction first will result in four overdraft fees.

A system of putting through the transactions in whatever order maximized fees would in the first year boost Union Bank's overdraft revenue by $18 million, or nearly 25%, CAST estimated. CAST also recommended raising the charge per overdraft and sought one-fifth of all additional revenue.

Some Union Bank executives balked. "Well, as a UBOC shareholder [and a consumer] I would STRONGLY disagree with the high-to-low approach," William Christensen, the bank's executive vice president for item processing, wrote to colleagues in a 2003 email released by the court. "I don't believe that UBOC [Union Bank] has ever done this before … I don't think the bank ought to do anything that encourages a class action lawsuit right now."

Email messages indicate that other executives also opposed a switch to high-to-low debit card processing, and the idea appears to have languished for a while. But in May of 2003, with Union Bank apparently scrounging to make its numbers, its chief marketing officer, Gretta Ryan, raised high-to-low again.

"CAST seems to believe it had seven-figure opportunities and given we are drifting way behind budget I'd like to see if this was ever implemented," Ryan said in a May 21, 2003 email. In a followup email a month later, she acknowleged her colleagues' distaste for high to low but advocated moving forward anyway. "We are not taking any of these concerns lightly but obviously with $1.0mm a month at stake we want to try to work them through to … let the risks be weighted against the rewards," Ryan wrote in an email to colleagues that is disclosed in the Florida class action.

Ryan is still with the bank but did not respond to an email seeking comment. She also appears to have felt pressure to brush aside employees' qualms about highest-to-lowest processing from the fact CAST was portraying bank competitors as forging ahead.

"Everyday [CAST employees] email me with another Bank's practices," she wrote. "5th 3rd [Fifth Third Bank] switched to high to low posting order and according to CAST, they have never looked back."

Conclusion

Neither would Union Bank. In the summer of 2003, it established a "High to Low Implementation Team" in cooperation with CAST. In the first year, overdraft revenue jumped far more than expected — by $33 million to a total of $125 million.

Customer complaints finally led 2009 to suggestions by employees that Union Bank reverse its high-to-low processing.

"There is considerable pain around overdrafts in general," Chief Administrative Officer Linda Odenath wrote to colleagues in 2009, citing high-to-low processing as problematic. Once a customer is overdrafted "it is hard to catch up," she added.

Despite such concerns, Union Bank did not reverse its policy on debit card transactions for another year, by which time it was embroiled in the multidistrict litigation.

"While I have always had a philosophical problem with paying high to low, I suspect the loss of income would be significant if we were to change at this time," senior vice president Mark Woods wrote to colleagues.

Whenever you hear a business say that government regulations cause them to charge more for something don't believe it. There are studies that show that very few regulations result in appreciable increases in costs that are a burden to companies.

Their complaints are only based on greed. See the above comments in bold for evidence